Silicon Hutong

Why I study war (and why you should, too)

Starbucks Lido

Blogging on the BlackBerry

0921 hrs.

In the midst of a discussion about business in China, a friend of mine and I had reached that point in the conversation where the talk was either on the verge of becoming profound or it was about to descend into arcana.

The discourse paused for a moment while the waitress brought our drinks. There was a relaxed pause as we each caught our mental breath.

"I've been meaning to ask you a question for a long time," he said. "Why do you read so much about war?"

Yes, why?

It was one of those questions that slams your brain into a hard left turn, not just because it was a hefty change in the direction of the conversation, but because it cut right into me. With all the books, blogs, papers, webcasts, magazine and newspaper articles on China, business, marketing, strategy, and communications out there, what the hell am I doing studying military science, military history, and international security?

I gave a flippant answer: "I enjoy it," and quickly returned to the previous topic. But there is more to it than just the recreational value.
Truth is, after three decades studying the martial sciences and two decades in business, I have discovered that not only does "studying war" enrich the development of business leaders, but also that a lot of businesspeople and companies desperately need a mental dose of modern military thinking.

Swords into pruning hooks

Let's address the question of morality first, as I am painfully aware that many people equate the study of war with the dangerous propigation of man's warlike instinct.

What is gained from the study of a subject depends entirely on the intent of the student. You can study anthrax with a view to using it to kill others, or you can study it so as to develop a cure, or to eliminate it and other infectuous diseases. In the same way, you can study war to help you plan an insurrection, organize a terrorist network, or invade a country. You can also study war to end an insurgency and what drives it, or defend a country from external threats.

Or you can study war as I do: to gain insights that can be intelligently applied in more peaceful endeavors. In fact, I think studying studying war is a moral imperative, even if the very idea of killing people and breaking things nauseates you - especially if killing people and breaking things nauseates you.

War's immense cost to mankind in blood and treasure through history is staggering. For us to waste any opportunity to derive whatever benefit possible that can be derived from that experience is unconscionable. A moral person may recoil from the ravages of war, yet acknowledge that we are ethically bound to extract from its study any lessons, innovations, models, or giudance that can be put to peaceful, productice, positive use.

Business and war

Of all fields that martial endeavors have influenced, perhaps the most compelling - and controversial - is how it influences business.

Drawing equivalence between war and business is an imperfect comparison at best. You may not buy the idea that "business is the moral equivalent of war," but like war business is fundamentally conflict and competition between groups for tangible ends. War is usually kinetic (the military's way of saying that it involves killing people and breaking things), and business is rarely kinetic, but there are enough parallels that key lessons can be shared between the two fields.

War and commerce are both conducted in the face of great uncertainty where the participants usually have a lot - or everything - at stake. Freedom of action is restricted - or enabled - by a series of factors outside the control of the individual. Time is insufficient, resources limited, and stress is high. The cost of failure, while not quite as severe in business as combat, is nonetheless high and very real.

Creating the business strategos

The first and most obvious way a study of war can enrich a business mind is in strategy, or, more specifically, helping a businessperson become a strategist - or at least a strategic thinker. In no field is strategy as important - nor the strategic art as well understood - than in the military, and the warrior-scholars (no, that is not an oxymoron) of history have added more good thinking to the field than all of the business thinkers put together.

For example, you probably know people who have read (or who have claimed to read) Sun Tzu's The Art of War. Long before Michael Douglas quoted Lao Sun while playing Gordon Gecko in the film "Wall Street," businessmen were tapping the ancient wisdom to inform their thinking. (Just a thought - anyone who actually did read Sun Tzu and took it to heart would never be caught quoting him. Why, after all let your opponent know how you think?)

The point is that Sun Tzu - a military scientist, after all - probably wrote the capstone text in business strategy, yet he was never even thinking about business. The reason his thinking is accepted in commerce is because generations of businesspeople had the foresight to recognize that good thinking, regardless of its origin, is what you need to succeed in business.

But wait...there's more...

So why stop at strategy? (For that matter, I wonder why most businesspeople go no further into the martial realm than Sun Tzu for their strategy, but that's a subject for another post.) There are a host of other areas where the military experience can enrich business thinking.

Take marketing, for example. Jay Conrad Levinson has made a career taking the simple ideas of guerrilla warfare - fighting larger rivals with unlimited resources when you have almost none - and applying them to marketing. Less known (for now) but equally wise Mike Smock has taken the theories of Sun Tzu and strategic visionary John Boyd and incorporated them into his Attack Marketing approach.

Just as marketing can benefit from a little martial thinking, so can consulting, managing global and dispersed enterprises, communications (internal and external), event management, and a host of specialty areas like medicine, telecommunications, and network theory.

There are entire spheres of business operations where the armed forces - especially those of the west - continue to match if not lead enterprise in the development of new thinking and approaches. Logistics and supply chain management, recruiting, training, intelligence, staff functions, career management, and creating and optimizing teams are areas where business owes much to the constant developments in these fields being driven by the armed forces.

Still not convinced?

You may be thinking "hey, aren't military types the thick-headed dudes we saw in ROTC who went into the armed forces because they couldn't get into grad school?" While I can't speak for your experience, understand that it's easy to be opinionated when your opinions aren't going to get people killed. The looming specter of death, defeat, and dishonor can turn a rigid thinker into an open-minded scholar awfully quickly.

Warriors become thinkers by necessity, not by preference. It is fair to say that the United States Marine Corps, for example, is a superb example of The Learning Organization. (Does your company produce a recommended professional reading list that covers each level of the organization? No? The Marines do, and the program has been so effective that all of the rest of the US armed services have picked up the practice.)

Even if you don't buy the whole business-war parallel, I urge you to pick up the book The Medici Effect. Frans Johansson describes how incorporating ideas from fields unrelated to your own with issues in your own area are a tested and accessible path to innovation. The application of, say, a new history of the Battle of Midway to your day-to-day work may seem counterintuitive, but I'm 100 pages into the book and I've gained insights into Japanese institutional dynamics that for me opened a whole new vista on Asian management. That's "The Medici Effect" at work.

All the help we can get

Globalization and the tempo it forces on us has made doing business insanely complex. You especially feel this in China, where the pace is brutal and the conditions in constant flux. Against that context, and particularly as we pause at the edge of what look to be even harder times ahead, we are foolish to ignore any rich vein of insights and approaches to difficult problems.

There is NO next-best thing to being here

Wangjing Gardens, 23/F

Looking over Northwest Beijing

1414 hrs.

As we watch these global arguments around whether heads of state should come to China for the Olympic opening ceremonies, another question rears its head in the shadows: where are all of the CEOs? And not just around the Olympics, but generally?

There has been a noticeable dropoff in the visibility of the multinational CEO in China. Part of this is the result of growing restrictions on the time national leaders spend in the presence of non-Chinese business executives, which itself is partly the result of the falling priority Chinese policymakers assign to foreign investment.

I sense, however, that there is more to it than this. Market access is no longer as problematic as it once was. Corporate focus has shifted to the day-to-day conduct of business, and many executives have likely convinced themselves that it is not as important to come to China as it once was.

One immediate example: as Apple opens their first China store in Beijing this week, Steve Jobs could not be bothered to decamp beautiful metropolitan Cupertino to attend the opening, much to Apple's loss. (We in the Hutong fervently hope that this is not for health reasons, and if it is, respectfully withdraw the preceding comment.) But Apple is not the only guilty party. The CEO who regularly comes to China (i.e., more than once per year) is the exception, not the rule.

That by itself is shortsighted. But I submit that much more is needed.

Put your butt where your business is...or will be

I am a huge fan of self-education generally, and I think that learning about China via books, web sites, blogs [see my blogroll], magazines, podcasts and other formats is a huge help to give yourself a strong foundation, maintain a clear view of China's evolving context, and stay current when you cannot be here.

For someone interested in China as a tourist or as an intellectual exercise, that and the occasional trip would be sufficient.

But for an individual who is counting on China as a significant chunk of his or her company's future, simply popping in now and again isn't enough. I discussed this at length with Christine Lu at China Business Network in a recent podcast, so I won't repeat it all here, but two points bear discussing - one that I made in the chat, one that I thought of later.

First, such a long parade of CEOs have aped key phrases like "how important China is to our company" and "how committed we are - and I am personally - to China" that those words have become platitudes. Officials and Chinese consumers alike simply ignore them. If you want to make it clear you are committed to China, you have to stop talking and start doing.

The best way I can think of proving that - better even than a monetary investment - is physical location. If China is so important to your company, Mr. Chairman, then transfer the flag. Take advantage of modern technology and the host of magnificent places of lodging and living and move to China for a bit.

Is China 40% of your business? Can it become 40% of your business? Then pack the bags and come spend 4 months a year here. I guarantee you that the insights, relationships, and brand value you get in the process will make it well worth your while.

MBWA is not about frequent flyer miles

Second is a lesson from Tom Peters - the best way to run a business is to spend as little time as possible at headquarters. Peters called it "managing by walking around." To Wal-Mart founder Sam Walton, it meant four-and-a-half days a week on the floors and stockrooms of his stores and distribution centers. To my dad, it meant spending about six hours a day on the factory floor, and most of the rest with customers.

To an executive running a global business today, it means getting on the plane and renting long-stay suites in countries that may not offer the creature comforts you're used to. Suck it up. Sure, you have great people running your offices, branches, and subsidiaries around the world. This is not about them. This is about you having an instinctive feel for the market so that your smart people on the ground can spend their time winning and keeping business, not giving you an extended course in China 101.

Elsewhere on the net

I also had a chance to talk to ChinaONTV about the China ICT conference, where I was a substitute moderator. Not quite as insightful an interview, but I really enjoyed my time at the conference and thought it stood out above a lot of the local tech confabs. Try this link if you're in China, and this one if you're not.

Aloha Airlines, RIP: Your customers may kill you

In the Hutong

Party Secretary on the piano

1056 hrs.

The death of Aloha Airlines can be used as an allegory for many things, but the lesson I take from it is that we as consumers need to rethink the role we play in the world. 

It's all fine and good to say "hey, I'm going to go over here and buy stuff because it is cheaper." That's the way we've been taught, and for many of us the need to save money is a matter of life and death.

How low do we need to go?

But a large and growing number of consumers around the world aren't going for "everyday low prices" because it means the difference between eating and not eating, or between having new clothes and going naked. For many, the issue is a matter of being able to buy what we need, and being able to buy a whole lot of things that we don't really need. 

When we were in Honolulu a month ago, we wandered over to the Wal-Mart behind Ala Moana Center, about two kilometers from our hotel in Waikiki. Prices were, frankly, really low, and when you walk into a place where decent quality is available at an irresistible price, a little gland in the back of your head fires and suddenly you are filling the cart with a ton of stuff that you don't really need. Think impulse buying on a grand scale that continues right up to the checkout line. 

The Party Secretary then did a triage on the cart, and we wound up "restocking" a significant chunk of the items that we had grabbed that we did not have on our list when we walked in the store. But we still bought stuff that frankly, we didn't need. 

And that is the upside to everyday low prices. We buy stuff we don't need because it is cheap, and we not only institute the Wal-Mart Effect, we also bring about unintended consequences in the form of waste, environmental damage, questionable labor practices, and businesses of all types driven into hardship, bankruptcy, or dissolution. 

So long, and thanks for the trips

And such was the case with Aloha Airlines. People saw the near term benefit of $29 interisland airfares that on the U.S. mainland would have undercut Southwest airlines by 65%. They ignored the long-term problem of destroying a business upon which much of the Hawaiian economy depends. And they were warned.

Oh, sure, there are still plenty of planes flying around Hawaii, but they are smaller (meaning more flights to carry the same number of people) and have no belly space (meaning the island lost critical cargo capacity to support not only its businesses, but that would drive up prices on everyday goods to everyone in the islands.) 

Time for Consumerism 2.0?

And service quality will decline. How many Californians old enough to remember the days of Pacific Southwest Airlines and AirCal would love to have those two airlines back, instead of USAir and United Shuttle? And how many of us would be willing to pay an extra $30 on a round-trip to have it?

I've always been something of a Milton Friedman laissez-faire capitalist. I am all in favor of creative destruction wreaked by the market. 

But I'm starting to realize that when we enable creative destruction, we have to use a little more foresight and understand exactly what it is we are destroying. The hidden hand will not ensure that creative destruction will not destroy something worth saving - we will, as consumers. 

Consumers in Hawaii are learning this the hard way. 

All of us had better. And soon. 

Selling Hong Kong

In the Hutong
Lactose Intolerance is my Cross
0832 hrs.

BusinessWeek reprints Gareth Powell's China Economic Review piece documenting how Shenzhen is about to overtake Hong Kong as the world's third-busiest cargo port.

On trah what?

Hong Kong began and grew as a trade entrepot, and for many years after 1949 was a busy center for manufacturing as well. Reforming and opening of the mainland have sucked most of the manufacturing upriver and inland, and (as today's story underscores) Hong Kong's importance as a center of transshipment declines as its picturesque harbor is pinched by reclamation and development - not to mention rising property values, growing pollution restrictions, and the climbing cost of labor.

In spite of all of this, Hong Kong's port will continue to prosper for a time. But to rely on the port for growth or economic vitality is growing less practical. Even the city's major port operators are betting on investments in faraway quays and harbors for their long term prosperity. Clearly, physical logistics is not the basis on which the SAR's leaders can or should build a vision for the future.

(Nor, for that matter, is some well-intentioned belief that the city is a great place to build online businesses - many of those industries are highly labor, power, and real-estate intensive, and the back rooms of Shenzhen, Hangzhou, Beijing, and Dalian are arguably better suited to become multimedia centers.)

More than Ports and Property

As many readers know, I hardly qualify as a Hong Kong booster: I think many of its people (Chinese and foreign) believe themselves far more expert in mainland affairs than they truly are, and I believe that the city clung to its role as a gateway to China long after that ceased being either true or necessary.

But I believe in Hong Kong, and feel that if the SAR could understand what it offers - and what it doesn't - it need not decline to become a lesser light than Shanghai and Singapore, a path it appears to be treading.

Where Hong Kong excels is in services. It remains perhaps the easiest city in all of Asia to get a lot of stuff done in a very little time. Every time I go to Hong Kong I am amazed at how many things I can knock off my list in the space of a morning or a single day. My company is domiciled there. My lawyers, travel agent, and accountant are all there, as are my bank, my tailor, my computer store, and my dive shop. What is more, I can get to every single one of those places in a single day, with time left over for lunch and some random shopping.

It remains the best place in the region to hold meetings, attend conventions, or run training programs. Setting up - and operating - a company there is about as easy as it gets. It is simpler and faster in Hong Kong than Singapore, Beijing, Shanghai, or Tokyo to do my banking, send a parcel (or myself) anywhere on the planet, buy a mobile phone, shop for just about anything, get a suit made, watch a movie, find a wi-fi hotspot, eat a meal, rent an office, buy a CD, or find a Moleskine notebook.

Where else is there a higher density of every business craft or profession? Law firms, accounting firms, advertising agencies, investment banks, venture capitalists, and head hunters abound in such profusion that you could probably get your needs met in any given office tower in Central.

(The Village Grouch and I frequently swap Hong Kong stories, each trying to outdo the other on how fast we got from the gate to the train at the airport, how much we got done in a morning or an afternoon, or comparing notes on our latest "Hong Kong hack." Yes, I know, it's a pathetic hobby, but it is mine.)

It's the Services, Guys

If I were doing a marketing campaign for Hong Kong, I wouldn't be pushing it as a "city of light" or "Asia's world city." Both campaigns are fine for people who have never been to the city and are looking to spend a few days in a conveniently compact Asian metropolis. They will not, however, bring people - and their investment dollars - back.

If I were doing a campaign for Hong Kong, the tagline would be simple:

Hong Kong. At Your Service.

Forget real estate and shipping. If I were Donald Tsang or any of his staff, I would be giving a lot of thought to how to shift the SAR's industrial policy and external marketing toward highlighting - and growing - Hong Kong's role as the service entrepot of - if not Asia - certainly of Greater China.

Getting Serious about Service

To make that happen, the SAR government needs to get itself a laser-focus on becoming the place where stuff that is unnecessarily difficult to do elsewhere is utterly simple to do in Hong Kong.

That means a marketing campaign aimed at three separate audiences - tourists, business people, and corporations - that all emphasize how Hong Kong is a critical part of Asia for them because Hong Kong will help them a) get stuff done, and b) make getting stuff done elsewhere in the region simpler.

That means an effort to attract and retain major personal and business service companies from around the world.

That means an education policy that prepares Hong Kong's children to be leaders in service based industries, including a commitment to restoring Hong Kong's leadership in English language instruction.

That means a policy focus aimed at encouraging - even subsidizing - companies who are genuine innovators in services. You have a better way to do something for people? This is where you want to be.

The great part of all of this is that Hong Kong is already half way there. Services dominate the economy. Hong Kong's major brands - Cathay Pacific, HSBC, A.S. Watson, Hutchinson, Shangri-La - are almost all service brands.

The greatest problem is one of positioning: Hong Kong has never articulated these strengths well. That needs to change. Now.

Otherwise the city is doomed to become a sad provincial shadow of itself, a narrow stretch of water surrounded by expensive real estate and the effluent of the Pear River estuary.